Pandit pledged in 2009 to receive an annual salary of $1 until the struggling Citigroup returned to sustained profitability.
On Friday afternoon, three days after the bank reported its first full year-profit since 2007, the board raised his salary to an annual base of $1.75 million.
The pay raise will be effective immediately, Citigroup's board said in a regulatory filing.
Massive losses during the financial crisis forced Citigroup to take $45 billion in U.S. government bailout funds. Pandit, who was named CEO in late 2007, presided over two full years of losses before the bank reported its fourth consecutive quarterly profit on Tuesday.
The U.S. government also sold the last of its Citigroup stock in December, helping the bank shed its status as a government ward.
The worst is over for Citigroup -- certainly there was a point in which people thought it would have to be broken up, said Richard Lipstein, a managing director at Boyden Global Executive Search, which consults for financial companies.
The days of the $1-a-year Wall Street CEO are over, he said.
Pandit's new base salary is about 35 times the U.S. median household income, which was about $50,000 in 2009.
Even by the standards of post-financial crisis Wall Street CEOs, Pandit has rebounded nicely. Citigroup will pay him almost twice what larger rival Bank of America Corp
Citigroup's board did not provide additional information about the bonuses or incentives Pandit would be eligible for. The board said in September that it intended to raise his pay in 2011.
Pandit has sold assets, cut staff and tried to focus Citigroup on its main businesses, including investment banking and retail banking for affluent customers globally.
Chairman Richard Parsons said in the filing on Friday that Pandit has worked tirelessly to put Citi back on the right track, spearheading a restructuring that has returned the company to profitability and positioning the company for future growth. In light of these highly positive accomplishments, the base salary established for Vikram is merited.
Citigroup shares closed up 1.9 percent on Friday at $4.89.
(Reporting by Maria Aspan; additional reporting by Dan Wilchins in New York and Joe Rauch in Charlotte; Editing by Bernard Orr)